Natural Gas Economy
TOPIC: General Studies 2 & 3
- Government schemes and policies
In News: The government allowed complete marketing freedom for natural gas produced from non-regulated fields.
- To prescribe standard procedure to discover market price of gas to be sold in the market by gas producers, through a transparent and competitive process
- Permit Affiliates to participate in bidding process for sale of gas
- Allow marketing freedom to certain Field Development Plans (FDPs) where Production Sharing Contracts already provide pricing freedom.
Aim: The policy aims to provide standard procedure for sale of natural gas in a transparent and competitive manner to discover market price by issuing guidelines for sale by contractor through e-bidding. This will bring uniformity in the bidding process across the various contractual regimes and policies to avoid ambiguity and contribute towards ease of doing business.
- The policy has also permitted Affiliate companies to participate in the bidding process in view of the open, transparent and electronic bidding. This will facilitate and promote more competition in marketing of gas. However, rebidding will have to be done in case only affiliates participate, and there are no other bidders.
- The policy will also grant marketing freedom to the Field Development Plans (FDPs) of those Blocks in which Production Sharing Contracts already provide pricing freedom.
These reforms in gas sector will further deepen and spur the economic activities in the following areas:
- The whole eco-system of policies relating to production, infrastructure and marketing of natural gas has been made more transparent with a focus on ease of doing business.
- These reforms will prove very significant for Atmanirbhar Bharat by encouraging investments in the domestic production of natural gas and reducing import dependence.
- These reforms will prove to be another milestone in moving towards a gas based economy by encouraging investments.
- The increased gas production consumption will help in improvement of environment.
- These reforms will also help in creating employment opportunities in the gas consuming sectors including MSMEs.
- The domestic production will further help in increasing investment in the downstream industries such as City Gas Distribution and related industries.
Why Natural Gas?
- Natural gas is a superior fuel as compared with coal and other liquid fuels being an environment friendly, safer and cheaper fuel.
- Natural Gas is supplied through pipelines just like one gets water from the tap. There is no need to store cylinders in the kitchen and thus saves space.
- Natural Gas (as CNG) is cheaper by 60% as compared with petrol and 45 % w.r.t. Diesel. Similarly, Natural Gas (as PNG) is cheaper by 40 % as compared with market price LPG and price of PNG almost match with that of subsidised LPG (based on prices in Delhi). An autorickshaw owner can save Rs 7000-8000 on his monthly fuel bill by conversion from petrol to CNG. Thus, even on cost front as well, natural gas is preferable to petrol, diesel and LPG.
Indian Gas Exchange (IGX)
- It is the first nationwide online delivery-based natural gas trading platform.
- It is fully automated with a web-based interface.
- It has been incorporated as a wholly owned subsidiary of the Indian Energy Exchange, which is India’s energy market platform.
- The trading platform will enable market participants to trade in standardised gas contracts.
- It is expected to facilitate transparent price discovery in natural gas.
- It shall also facilitate the growth of the share of natural gas in India’s energy basket.
- It provides hassle-free trading experience to the customers.
- It will allow buyers and sellers of natural gas to trade both in the spot market (financial instruments, such as currencies are traded for immediate delivery) and in the forward market (an over-the-counter marketplace that sets the price of a financial instrument for future delivery).
- The trading of natural gas will be for imported natural gas across three hubs — Dahej and Hazira in Gujarat, and Kakinada in Andhra Pradesh.
- Imported Liquified Natural Gas (LNG) will be regassified and sold to buyers through the exchange.
- The need for buyers and sellers to find each other shall be removed.
- The price of domestically produced natural gas is decided by the government which will not be sold on the gas exchange.
Must Read: Role of Oil and Natural Gas in Economy
Connecting the Dots:
- Energy Security in the post-COVID world
- Energy is a key driver of socio-economic growth. Discuss.
- Write a short note on the distribution of natural gas across the world. Do you think natural gas can address the challenge of global energy crisis in the long run? Critically examine.